FINANCIAL MANAGEMENT - GOALS AND FUNCTIONS

Abstract

Financial management plays a dynamic role in the development of a modern company. Intense competition between corporations, technological change, volatile inflation, volatile interest rates, global economic uncertainty, fluctuating trends, changes in tax laws, and ethical concerns about determining financial matters are a daily occurrence to which they should pay close attention. The modern financial manager must have the flexibility to adapt to changes in the external environment where his company can survive.
In an economy, the optimal allocation of resources and vital resources for optimal growth of that economy is essential to ensure the conditions for success. Major changes and uncertainty in the environment emphasize the importance of financial management, whose primary role is to make and implement business decisions. Thus, through the creation, financing and management of property, the financial manager contributes to the company, as well as to the vitality and the growth of the overall economy.
The financial management takes care of the acquisition, financing and management of the property having in mind the basic goal of the operation - making a profit. The main goal of financial management is "maximizing the wealth of shareholders" - increasing the value of their shares. Financial management also includes a decision-making function, which consists of three important decisions: investment decision, financing decision and dividend decision.
The wealth of the shareholders is shown through the market price of the ordinary shares of the company, which is a result of the decisions made for investment, financing and the decision for distribution of dividends. The success of the business decision is directly reflected in the market price of the share. The increase in the market value of the company's shares can also be influenced by good corporate governance. Financial management in such cases has a role to play in advancing corporate management and corporate finance in the company.
The primary purpose of corporate finance is to increase corporate value while reducing the financial risk of the firm. Although it is fundamentally different from managerial finance that studies the financial decisions of all firms, not just corporations, it is a major concept for studying corporate finance that is applicable to the financial problems of all types of firms.